At the beginning of the year I was adamant that higher fuel prices were negative for the overall economy and in turn beneficial for both Walmart and in particular Dollar General. Today, with the decreased price at the pump one could lean towards the opposite end of the spectrum, arguing that with more money in the consumers pocket they will upgrade their spending habits. This assumption is wrong. Over the last few years in the time of this dire recession, Americans habits have changed. Americans have become more money conscious without even realizing it, they have learned to pinch penny’s without even attempting to. With continued lower prices at the pump we will see overall better sales in the lower end, in names such as Walmart and Dollar General.
Walmart prides itself on having some of the best prices around and some days Dollar General goes as far as to beat them at this game (due to smaller square footage, aka less overhead). Either way these entities are set up to make a killing in the recent environment that has surfaced. The key to the coming success is their access to consumers. Walmart and Dollar General have a strong consumer base that they have established through the rough part of the recession. Now these consumers will have a few extra dollars in there pockets. So in turn Walmart and D.G. will have a few extra in theirs as well. We will see the consumer base step up and not only purchase more items, but possibly step up to name brand items, that are higher margin. This suggests that even with a somewhat bettering economy both Walmart and Dollar General are places to be (possibly Target, but that’s an article for another day).
Photo by Patrick Hoesly